2023 (10) TMI 1473 - AT - Income Tax

Addition u/s 68 - cash credits, which is loan here, has been added - Discharge of initial onus - HELD THAT - AO has mainly relied upon the report of investigation wing to come to the conclusion that the assessee has availed only accommodation entries. He has also referred to the non-reply of the notices issued by them. As noticed earlier, it is not the case of the AO that the assessee did not discharge initial burden placed upon her u/s 68. When all the relevant details are available with the AO, it is the requirement that the AO should examine those documents and could reject them, only if he finds fault with those documents. We notice that the AO did not find any deficiency or fault with the evidences produced by the assessee. We notice that the AO did not confront the statement given by Shri Deepak Babel with the assessee. It is the case of the assessee that the above said person has retracted his statement. The assessee has filed copy of retracted statement. The assessment order is silent about the retraction. In our view, the AO has not carried out enough examination to prove that the loan was only accommodation entry, particularly, in view of the fact that the assessee has discharged the initial burden placed upon it. In the present case we are of the view that the AO was not justified in disbelieving loan amount received by the assessee and assessing the same as income of the assessee u/s 68. CIT (A) was not justified in confirming the assessment. Decided in favour of assessee.

Summary

Issues:
Challenge to addition of Rs. 25.00 lakhs made under section 68 of the Income Tax Act.

Analysis:
The appeal was filed by the assessee against the order of the Ld CIT(A) confirming the addition of Rs. 25.00 lakhs under section 68 of the Income Tax Act. The assessee, a partner in a construction company, had taken a loan from a diamond business company, M/s Delight Diam P Ltd. The AO reopened the assessment based on the statement of a director of the lending company, admitting that the loans were bogus. The AO concluded that the loan taken by the assessee was an accommodation entry. The assessee provided PAN details and bank account copies, but failed to produce the directors of the lending company, leading the AO to treat the loan as an accommodation entry.

In the case, the addition was made under section 68 of the Act, which deals with unexplained cash credits. The burden of proof lies on the assessee to establish the identity of the creditor, genuineness of the transaction, and creditworthiness of the creditor. If the assessee meets this initial burden, the onus shifts to the assessing officer to disprove the claim. The AO initiated reassessment based on an investigation report, but the report relied on a retracted statement of a director of the lending company.

The Tribunal found that the AO did not prove that the loan was an accommodation entry, especially since the assessee had discharged the initial burden of proof. The AO failed to confront the director's retracted statement or find any fault with the evidence provided by the assessee. As a result, the Tribunal held that the AO was unjustified in treating the loan as income under section 68. The order of the Ld CIT(A) confirming the assessment was set aside, directing the AO to delete the addition of Rs. 25.00 lakhs made under section 68 of the Act.

Ultimately, the appeal filed by the assessee was allowed, and the addition was deleted.